First part of a short history of redevelopment in Fremont and California

At a time when state and local officials are fighting over the future of redevelopment in California I thought it might be useful to consider redevelopment's history, especially its history in our city of Fremont. I'll start out the discussion with a short summary of redevelopment in California, then continue with the history of redevelopment in Fremont up to the time the city raised the cap on total tax collection by the Redevelopment Agency to $1.5 billion dollars. Next week I'll continue the history, bringing it up to the present date and speculating on several future scenarios.

HISTORY OF REDEVELOPMENT IN CALIFORNIA

California redevelopment began with a law passed in 1945  that allowed for the creation of redevelopment agencies with the powers of eminent domain. A constitutional amendment passed in 1952 allowed redevelopment agencies to issue bonds to be paid off by the increases in property taxes in the redevelopment areas. This is called tax increment financing. In 1976 a law was passed that required redevelopment agencies to set aside 20% of their tax increment for affordable housing, which ensured that liberal groups would become staunch supporters of redevelopment in spite of its sometimes dubious activities such as funding golf courses and sports stadiums, and providing grants and loans to the politically well-connected who had property interests in the redevelopment areas.

The original purpose of redevelopment was to allow cities to clear slums using eminent domain, and to make these slum-clearing efforts self-financing. When the 1952 law creating tax increment financing for redevelopment agencies was passed, Proposition 13 was twenty-six years in the future, so the impact of any property tax revenues diverted to redevelopment had an immediate and visible impact on the local school systems. This presumably acted as a check on the growth of redevelopment, so that the majority of California's 398 redevelopment agencies were created after the passage of Proposition 13. One change after the passage of Proposition 13 was that the State of California pledged to make up any shortfall in local property revenue for local schools by guaranteeing a minimum amount of per pupil funding. The state's General Fund would make up any difference between the minimum amount, and the amount generated by local property taxes. This generous provision on the part of the state led city and county officials to think of redevelopment as a way of keeping property tax revenues in their communities and under their control rather than losing them to the big black box of state education funding. Another Proposition 13 change was that property tax revenue would begin to fall farther and farther behind inflation, creating long term funding problems for both state and local governments. Post Proposition 13, Redevelopment entered a phase of rapid growth, going from consuming 2% of total California property taxes to its present diversion of $5.5 billion, representing 12% of total property taxes paid, and 20% of California's current budget deficit. 

HISTORY OF REDEVELOPMENT IN FREMONT

Fremont got on the redevelopment bandwagon just before the passage of Proposition 13. The Niles and Irvington redevelopment areas were created in 1977, 21 years after Fremont was incorporated. The initial Niles redevelopment area was 68 acres and the Irvington area was 150 acres. They were originally allowed to collect tax increment funding for 51 years, until 2028. These modest redevelopment areas conformed with the traditional definition of  "blighted": old downtowns with low occupancy and rundown buildings.

Then someone in Fremont's government got the bright idea of turning 3000 empty acres in South Fremont that were in the direct path of north-moving Silicon Valley development into a giant redevelopment area. This area could hardly be called blighted, since it consisted of empty land, but in 1983 no one was paying much attention to local redevelopment, and Fremont had no trouble in creating the Industrial Redevelopment Area. The original purpose of this redevelopment effort was to improve four freeway interchanges on 880, to build a multi-modal transit center, and to create a lifelong learning center. Any development at all in this area would be a windfall for Fremont's Redevelopment Agency, since all the property tax increase caused by building up empty land would be part of the tax increment. The area did develop, first with the Auto Mall. This was such a successful generator of tax increment revenue that the Redevelopment Agency had to amend the Industrial Redevelopment Plan in 1993, ten years after it was created, as the Industrial Area was already approaching its cap on tax increment collection.

302 acres in Centerville were declared a Redevelopment Area in 1997, just before the 1998 merger of the Redevelopment Areas into one physically non-contiguous but financially joined entity. The purpose of this merger was to enable the Redevelopment Agency to spread the tax increment revenue from the Industrial Area, approximately $22 million annually in 1997, on projects in the old city centers. Though the lifetime learning center and transit center projects in the Industrial Area were still mentioned in the merged plan document, they'd evidently been sidelined in favor of projects (like the Washington Boulevard and Paseo Padre grade separations and the Irvington BART station) that would be part of the regional effort to bring BART to the South Bay.